What to Expect when Applying for a Merchant Account

Accepting credit cards is very common and a necessity for most businesses. Applying for a merchant account has also become a much quicker process. Many processors operate with the expectation that you know the process and don't take the time to explain what is required. This raises the question: What should you expect when applying to accept credit cards?

Once you’ve decided to apply for a merchant account with a processor you will need to provide some information about your business. Be prepared to explain the product or service you provide, when you charge the customer, and the average amount you expect to charge. This can be tricky to estimate if you are a new business. What the processor is trying to gauge is the risk of your account. The larger the transaction and the larger the time between processing the payment and delivering the product, the greater the risk. Make an educated guess and don’t stress about it. If your numbers are off by more than 10% (once you've started processing), give your processor a call. They should be able to correct the estimates in their system to ensure quick funding. If you process a larger transaction than you applied for expect your processor to contact you. They will require an explanation and potentially documentation of the transactions (invoice, copy of customer signature, etc). The processor will also need to know how you plan on processing the transaction. Their are major pricing and risk differences between swiping and keying a card.

At this point the processor is able to provide you pricing. Don’t be afraid to ask what the fees are for and when they are billed. Less reputable companies will try to gloss over the pricing. This is not a good sign. Credit cards will likely provide over 50% of your company’s income, now is the time to ask questions!

The processor should also review the various equipment solutions at this point. They should explain the cost of their recommended solution and why they feel it works best for your business. Don't be afraid to ask about other options to accept payments. Some processors will recommend a stand alone terminal because that is the only option they support. If you never see your customer a virtual terminal will work great for your business and reduce your equipment cost by 100%.

After agreeing on pricing the processor will want to know where you business is located. They need to know not only where the services are rendered, but the business’ address (many times the same) and the address of the signer for the application.

Many signers wonder why their personal address is needed. It is because the processor needs to confirm who the signer is. The signer must also provide a government issued ID. The easiest way to solve this to provide a copy of a valid driver’s license. It will satisfy the government ID requirement and allow the processor to confirm the address.

In a sole prop company the signer must also be the owner and they must provide their SSN. SSN is required on sole props due to the patriot act. This is to mitigate risk of merchant account being used to launder illegally obtained funds. In other corporation types the last 4 of the SSN are usually required. This is typically used for identification in the future.

Most sole props will also be required to sign a personal guarantee. This is a personal guarantee that you will be responsible for the funds provided to your company. This can seem unnerving (especially if processing a few million). Remember, you are already responsible for this by providing the product or service to your customer. If you don’t want to sign this, incorporate your business.

At this point the processor should be able to provide you with a completed application and terms of service. The application should disclose all fees for the account, but may not be the case. Be sure to review the charges. Also, double check the information about your business. The volumes, payment method, and addresses should be correct. Ask any questions you have.

Once you are comfortable with the application sign and date where appropriate. When you return the application include a government ID and a voided check. The voided check should be for the account you want the funds deposited into. If you do not have checks or only have starter checks you may need to submit a letter from your bank verifying your account.

After submitting your application it typically takes 1-3 days for a bank to underwrite and approve it. Faster isn't necessarily better. Processors that focus on fast approval tend to be less desirable. Again, over 50% of your income is dependent on this, they need to make sure it’s done right.

In some circumstances the processor may need additional information. Certain business types need to provide a license to operate and high risk businesses may need to discuss funding procedure and refund policies. Typically the processor will offer options to help your business process within Visa and MasterCards required practices.

After this you should receive an approval from your processor. They will send your equipment or login information within a day or two or approval.

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